Fed Hike aftermath Series: Hike probabilities over coming meetings

FOMC followed through its promise and hiked rates four times in 2018 and forecasted two more rate hikes for 2019. Current Federal funds rate - 225-250 bps (Note, all calculations are based on data as of 6th May)

• June 2019 meeting: Market is attaching 10 percent probability that rates will be at 2.00-2.25 percent, and 90 percent probability that rates will be at 2.25-2.50 percent.
   
• July 2019 meeting: Market is attaching 0.9 percent probability that rates will be at 1.75-2.00 percent, 17.4 percent probability that rates will be at 2.00-2.25 percent, and 81.7 percent probability that rates will be at 2.25-2.50 percent.
   
• September 2019 meeting: Market is attaching 4.9 percent probability that rates will be at 1.75-2.00 percent, 32.3 percent probability that rates will be at 2.00-2.25 percent, and 62.8 percent probability that rates will be at 2.25-2.50 percent.
   
• October 2019 meeting: Market is attaching 8 percent probability that rates will be at 1.75-2.00 percent, 35.2 percent probability that rates will be at 2.00-2.25 percent, and 56.8 percent probability that rates will be at 2.25-2.50 percent.
   
• December 2019 meeting: Market is attaching 2.6 percent probability that rates will be at 1.50-1.75 percent, 14.8 percent probability that rates will be at 1.75-2.00 percent, 40.9 percent probability that rates will be at 2.00-2.25 percent, and 41.7 percent probability that rates will be at 2.25-2.50 percent.
   

The probability is suggesting,

• Since our last review a week ago, the probabilities have tightened, despite several FOMC member hinting at rate cuts going ahead.
• The market is pricing the possibility of a rate cut with 58.3 percent probability, compared to 63.3 percent last week, and 43.7 percent in the week before that.